How to open a Chinese business in Russia: practical tips and recommendations

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Despite the current global crisis, Chinese companies are increasing their presence in the Russian market. The emergence of business relations between the countries began almost 30 years ago and the pace of the presence of Chinese companies is only increasing. Thus, the presence of the Chinese in the Russian market becomes significant.

The Chinese open companies in Russia with enviable regularity. So, since February 2018, the total number of LLC companies registered in Russia, headed by individuals or legal entities with Chinese citizenship, has amounted to more than 5.5 thousand firms. In comparison with other business partners of the Russian Federation, China was second only to Cyprus with a total number of companies at that time of more than 11 thousand. At the same time, the quantitative presence of Chinese organizations exceeded the number of companies founded by German citizens.

In this article we will talk in detail about how to open a business with China in Russia.

How to open a business in Russia for a citizen of the People’s Republic of China

The consolidation of trade and economic ties between the two countries has led to the intensification of business cooperation within the framework of the business presence of entrepreneurs in the partner states. Often, the subject of special attention of entrepreneurs starting their own business in the Russian Federation becomes the official registration of companies in the form of LLC. Among the reasons for this choice are:

• Optimal business strategy within the framework of development.
• An individual and other companies, including those registered abroad, can create an LLC. The only significant exception under this rule is the prohibition on registration of an LLC by a legal entity with one founder. At the same time, the total number of owners of this type of business organization varies from 1 to 50 people.
• A small entry threshold in the form of authorized capital. Recall that its minimum size is only 10,000 rubles.
• Functioning of an LLC in the presence of founders with foreign citizenship. In such cases, these LLC companies have opportunities and benefits equalized with other Russian companies.

The procedure for creating an LLC in the Russian Federation with a founder from China

The standard regulations for the registration of an LLC are implemented quite simply. To do this, you just need to submit a set of necessary documents and, within a few days after that, the business receives an official confirmation of registration. From the moment of the corresponding registration in the Unified State Register of Legal Entities, the company is considered established. The package of documents required for submission includes the following:

• LLC document. Implies a written certificate containing the decision to establish an LLC and the charter.
• The document of the founder. If there are 2 or more founders in the company, the package of documents must be accompanied by a corresponding constituent agreement. Considering the document of the founder, the classification is carried out as follows: for an individual, such a document is a passport, for a legal entity – a registration document and a director’s passport.
• Document for registration. The document for registration is usually a completed application of the established sample, the presence of a letter of guarantee, as well as an application for the application of a special tax regime.

All the listed documents, if they are written in English or Chinese, must be notarized.

After the moment of successful confirmation of registration, the bank account for the registered LLC must be activated. In addition to this, you should make a seal and start hiring employees.

To register an LLC, a person with Chinese citizenship must visit Moscow. Upon the arrival of the founder, the corresponding preparatory stages should already be completed. Such measures include the formation of a registration set of documents, as well as the organization of notarization of documents with a notary. After notarization, the documents must be sent to the MIFNS for the purpose of registration.

It is important to know that the implementation of a remote registration procedure for a Chinese citizen is possible. In such a scenario, the legalization procedure is different depending on the specific region of the PRC. For the territories of the Hong Kong SAR and Macao SAR, it is sufficient to provide an apostille together with a notarized translation. In the case of other regions, it will also be necessary to supplement the package of documents with consular legalization. At the final stage, the registration process is similar to the case involving a face-to-face format: certified documents will be submitted for registration on the basis of a power of attorney and in a few days confirmation of the establishment of an LLC will be received.

It is important to keep in mind that if Chinese citizens or companies have difficulties registering an LLC in Russia, then it is necessary to seek help from professional consulting companies. The specialists of the VALEN law firm are ready to assist in opening a firm in Russia. This is expressed in the provision of consulting services and assistance in the preparation of documents.  

How to appoint a citizen of the People’s Republic of China to the position of director?

Appointment to a senior position of a Chinese citizen is possible after the registration of the LLC, as he will need to obtain a work visa and a permit. The package of documents can be issued only with the participation of the company providing the workplace. However, due to the fact that at the time of filing LLC documents for registration, the company cannot be considered as a legal entity, it is impossible to hire a Chinese employee. Only a person with citizenship of the Russian Federation or the EAEU country can be officially appointed to the position of director of a company in Russia until it is officially registered.

Summing up all the information, we note that in order for a citizen of the PRC to open a company and then appoint himself as the head, the downloaded company needs to officially register an LLC and appoint a citizen who can perform his functions as a director. After the official accreditation of the company, a Chinese citizen must apply for a working category visa and a work permit. Only if these conditions are fully met, a citizen of the People’s Republic of China can take up the post of director in an LLC.

Which companies are present on the Russian market?

Based on the statistical information collected in order to get an idea of the degree of presence of Chinese business in the Russian Federation, we can draw certain conclusions:

• The specifics of the legal form of business organization in the form of LLC finds the best compatibility with such Russian business sectors as: construction industry, agriculture, production of goods.
• Representative offices are most typical for mining industrial business areas, as well as, in the case of wholesale and retail trade. The incentive for Chinese entrepreneurs to link their business activities directly with the Russian market is the desire to occupy those empty economic niches from which Western manufacturers have been actively leaving in industries directly or indirectly related to the manufacture of construction equipment.

Speaking about the reasons for such a trend towards the active entry of Chinese entrepreneurs into the Russian business market, it is worth considering a set of reasons that logically lead to this dynamic. In particular, the domestic business environment is significantly more profitable for entrepreneurial activity compared to the Chinese one. In addition, China finds Russia a very attractive partner due to its advantages in the field of logistics. The last, but no less important factor influencing China’s business course on rapprochement with Russian business can be allocated tax benefits that are beneficial for Chinese entrepreneurs.

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